Malaysia’s IPO Boom Short Lived?
Malaysia’s financial markets have had a good year in 2012, with IPOs alone raising $7.3 billion, which constituted 25% of all new listings in Asia-Pacific region. In value terms, Malaysia ranked third place in the world in IPOs after the U.S. and China. However, while Malaysia’s impressive number of IPOs was cheered by many, some observers question whether the same results can be replicated in the future, as the IPO boom has been primarily driven by domestic companies and investors.
Malaysia may face significant challenges bolstering its IPOs with foreign enterprises and capital. While a booming economy, Malaysia is not known for solid market infrastructure, which is considered by many to be necessary to attract global companies and investors. However, investors should take note of recent efforts made by the Malaysian regulatory authorities to improve its corporate governance standards. In a recent report published by the Asian Corporate Governance Association (“ACGA”) and CLSA Asia-Pacific Markets, Malaysia ranked fourth in terms of its overall corporate governance score, recognizing the efforts made by the Malaysian regulatory authorities to strengthen and enforce good corporate governance practices. The ACGA highlighted Malaysia’s progress in board reform, shareholder rights, director training and transparency, among other areas. Indeed, to show its commitment to improvement in these areas, Malaysia recently updated its Code of Corporate Governance in order to strengthen “the role of directors as active and responsible fiduciaries.”
This year’s successful IPOs have drawn the world’s attention to Malaysia, and the country now has an opportunity to translate increased interest into increased investment. While Malaysia may have a long way to go to catch up with more advanced Asian markets like Singapore and Hong Kong, continued reforms could appeal to governance-conscious and growth-minded global investors alike, making Malaysia a major IPO hub in the coming years.
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